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Kidder to Trim Its Municipal Securities Unit

October 14, 1987|Associated Press

NEW YORK — Kidder, Peabody & Co. said Tuesday that it would cut back its municipal securities operations, one day after market leader Salomon Bros. Inc. announced that it would get out of the suddenly unattractive business altogether.

Kidder, a unit of General Electric, said it would cut about 100 of the 280 jobs in the unit, but added that it would be able to find jobs elsewhere in the company for some of the employees.

Kidder said it remained committed to both issuers and investors in municipal securities.

Tax law changes have caused the municipal securities market to shrink to less than half its size of two years ago, and profit margins have eroded because of competition from commercial banks.

Tough Time for Industry

"The industry is experiencing a major shakeout, which is likely to continue throughout 1988," William G. Ferrell, senior vice president and head of the municipal security group, said in a statement.

But, Ferrell noted: "Following the shakeout, those firms which are properly positioned will be able to generate significant profits in a healthy, ongoing municipal securities business."

Kidder spokesman Robert Marquis said General Electric would not take a special charge against earnings to cover costs of the cutback, they would be absorbed as ordinary business expenses.

Salomon Inc.'s Salomon Bros., the leading underwriter of municipal bonds, said Monday that it would phase out the business by the end of the year as part of a streamlining that will include 800 layoffs.

Salomon Bros. predicted that the cuts would save it $150 million a year, but cutback costs would result in a charge of $60 million to $70 million against fourth-quarter earnings.

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